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The Sosa Company produces baseball gloves with a degree of financial leverage of 1.66 based on...

The Sosa Company produces baseball gloves with a degree of financial leverage of 1.66 based on the company’s income statement for 2004. What does that mean in its company's risk?

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Financial leverage depicts the use of debts to acquire additional assets. When this ratio is high, it means there is a high debt and the business is at a risk of bankruptcy. When financial leverage is 1.66, it means that the debts are 1.66 times of the Shareholder equity(assets). This means that company has a bankruptcy risk, due to high debts

keosha answered 2 years ago
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